Once upon a time, a victorious incomer who thought he had a right could take actual possession of the country from the previous king/queen and really own it. He/she would receive taxes from the inhabitants and use the money to pay for the admin of the realm, and the cost of wars.
Those who had helped to wrest the kingdom from the previous monarch were given chunks of land as a reward. William the Bastard used this system to advantage, and planted his Norman followers all over the country. What was left belonged to the King/Queen and was the Crown Estate.
While Monarchs spoke English and knew their country, this system worked (mostly) Then the Stuarts overspent and when the Hanoverians took over, there was precious little in the state coffers, they didn't speak the language all that well, and were not keen on all the hassle of raisIng more cash.
"1760 George III surrendered the revenue of the Crown Estate to HM Treasury as part of an exchange which relieved the monarch of all responsibility for:
the cost of the civil government
the national debt accrued by previous monarchs, and
his own personal debt.
In return, he received an annual grant known as the Civil List. By tradition, each subsequent monarch has agreed to this formality as part of the ritual of his or her accession. However, from 1 April 2012, under the terms of the Sovereign Grant Act 2011 (SSG), the Civil List was abolished, and in the future each monarch will receive from the Treasury a stipulated percentage of the Crown Estate's annual net revenue (currently set at 15%). This does not infer any legal right to the revenue of the Crown Estate itself on the reigning monarch, or change the nature of its ownership: it is simply a benchmark by which the SSG is set as a grant by Parliament." http://en.wikipedia.org/wiki/Crown_Estate